The Standard & Poor's 500-stock index's grind to a record high marks a milestone after a long slog back from financial-crisis lows.

The Standard & Poor's 500-stock index closed at a new record, marking a key milestone after a long slog back from financial-crisis lows. Stephen Wood of Russell Investments gives his analysis. Photo: Getty Images.

It comes as investors appear to be warming up to stocks for the first time in many years, as good news in their brokerage accounts—and meager yields on bonds—begin to outweigh memories of two brutal bear markets within the span of a decade.

The push into record territory came Thursday morning, as the S&P 500 broke past its previous record close of 1565.15 on Oct. 9, 2007. After hitting that peak more than five years ago, the benchmark shed more than half its value during the financial crisis, sinking to 676.53 on March 9, 2009. The S&P closed with a gain of 6.34 points, or 0.40%, to 1569.19 on Thursday.

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The final leg of the push higher for the S&P came despite a renewed flare-up of the euro-zone debt crisis amid concerns about a controversial bailout of banks in Cyprus. But the selloff proved short-lived.

Individual investors, who have spent the better part of the last several years shunning U.S. stocks, are showing signs of returning to the market. So far this year, U.S. stock-focused mutual funds—excluding exchange-traded funds—have taken in $32.6 billion, according to Lipper. Investors had pulled a net $445 billion from domestic stock mutual funds from 2007 through the end of 2012.

"Hitting a record is a nice milestone," said Terry Sandven, chief equity strategist for the wealth-management arm of U.S. Bank, which oversees $110 billion in assets. "It sends a signal to investors that there's opportunity in the equity market."

In recent weeks, equity strategists at Goldman Sachs, Morgan Stanley, Deutsche Bank, Wells Fargo Advisors, ABN Amro Private Bank and a number of brokerages have all raised their estimates for the S&P 500, citing the impact of stimulus measures by the Federal Reserve and a belief that U.S. corporations can continue to churn out a steady stream of profits.

Much of the rebound from the 2009 lows was a steep climb interspersed with significant setbacks and wild price swings. A U.S. credit-rating downgrade and debt troubles in Europe knocked prices sharply lower in mid-2011. Unprecedented efforts by central bankers around the world to stabilize financial systems with easy money policies and other untested policy measures have fueled strong rebounds.

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In recent months, the markets have taken on a somewhat calmer tone. Earlier this month, the CBOE Volatility index, known as the "fear gauge," reached lows not seen since early 2007, before the financial crisis.

"A return to normal is good news," said Kate Warne, investment strategist with Edward Jones. "It's taken a long time."

The S&P 500 joins other stock-market benchmarks already at new records. The blue-chip Dow advanced beyond its 2007 high on March 5, and closed at a new high on Thursday. The Russell Investments index of 2000 small-capitalization companies, meantime, notched a record on the first day of the year, and has climbed higher since then. However, the Nasdaq Composite Index remains about 35% below its March 2000 high, reached at the peak of the technology-stock boom.

For the first quarter of the year, which ended Thursday, the Dow Jones Industrial Average surged 11%, marking its best opening quarter of a year since 1998. While the Dow, which includes 30 blue-chip industrial names, is perhaps better known among ordinary Americans, the S&P 500, which gained 10% during the quarter, is the real benchmark for most of Wall Street.

Among Wall Street's thousands of mutual funds, 1,361 mutual funds managing a total $2.75 trillion are benchmarked to the S&P 500, according to fund tracker Morningstar. By contrast, only six mutual funds are pegged to the Dow, representing just $142 million.

Stocks in the S&P 500's financial sector fell more than 80% from peak to trough. Since then, the recovery has been led by consumer-discretionary stocks, which have more than tripled in value. Next best have been financial stocks, which have more than doubled in value.

Mark Lehmann, president of JMP Securities, thinks the S&P 500's record indicates that stocks have farther to run. In previous record rallies, he said, the gains were heavily concentrated in a few frothy areas.

"It's not like we've seen in the past. The Russell [2000 Index] has had a really good start; the small-caps have done quite well," said Mr. Lehmann. "The indexes have been moving in lock step. This is broader, wider and more lasting than a hyper, narrow and fervent kind of rally."

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